Will the upward trend in economic growth continue in 2018?

RBC Wealth Management-U.S. Global Outlook report explores opportunities in U.S. equities and fixed income

MINNEAPOLIS, Nov. 20, 2017 /CNW/ - Following eight straight years of economic expansion, the third-longest stretch since World War II, it should be no surprise some are starting to question how much longer it can last. The growth trend is expected to continue and investors still have opportunities for worthwhile portfolio gains next year, according to RBC Wealth Management's Global Insight 2018 Outlook.

"The U.S. has experienced steady growth over the past several years, and now with other major regions in better shape, the global economy has a firmer foundation today than it has in quite a long time," said Kelly Bogdanov, vice president and portfolio analyst at RBC Wealth Management.

RBC Wealth Management's Global Insight 2018 Outlook, compiled by RBC's Global Portfolio Advisory Committee (GPAC) showcases analysts' unique perspectives and highlights compelling opportunities for investors in the year ahead. Most of the opportunities are in equities, but select areas of fixed income are also attractive.

Highlights include:

Equities

• A simultaneous, durable upswing in most major economies is cause to be optimistic and invested, but still vigilant toward global equities for 2018.
• While a consolidation period or pullback would be normal following the strong rally in 2017, RBC's GPAC believes a moderate overweight position in global equities is warranted. Valuations of major markets have pushed higher, but remain attractive compared to bond prices.
• Within U.S. equities, analysts favor the economically sensitive financials and industrials sectors, and continue to like secular growers in the technology sector. Health care and energy are our preferred value plays. Small-capitalization stocks are on our radar screen for a potential upgrade in 2018, particularly if earnings momentum accelerates.

"While the pace of the U.S. expansion has been slow overall, its duration has been impressive," said Bogdanov. "We believe the U.S. and global economies are signaling there are additional equity market gains to come in 2018 and perhaps beyond."

Fixed Income

• In 2018, global central banks will be in focus as they gradually follow the U.S. Federal Reserve (Fed) in deliberately normalizing monetary policy. Slow growth, low inflation, and shifting demographics should ensure this is a gradual process and, as a result, interest rates should remain relatively low by historical standards.
• The Fed is forecasting three rate hikes in 2018. In our view, the Fed's belief that inflation will move toward its target shouldn't sidetrack its rate hike plans.
• Credit spreads have little room to tighten further, but we don't foresee significant spread widening amid solid economic fundamentals. We recommend a focus on quality and feel slightly higher Treasury yields could provide an opportunity to extend duration. Preferred shares and municipal bonds will continue to provide selective opportunities.

"We expect the U.S. economy to maintain its steady-growth path as key indicators show few recession risks on the horizon," said Craig Bishop, vice president and lead strategist, U.S. Fixed Income Strategies at RBC Wealth Management. "The wild card to stronger growth could be if the current administration can deliver on its fiscal stimulus plans."

About RBC Wealth Management – U.S.

In the United States, RBC Wealth Management operates as a division of RBC Capital Markets, LLC. Founded in 1909, RBC Capital Markets, LLC. is a member of the New York Stock Exchange, the Financial Industry Regulatory Authority, the Securities Investor Protection Corporation, and other major securities exchanges. RBC Wealth Management has $310 billion in total client assets with approximately 1,800 financial advisors operating in 200 locations in 40 states.

This material is for informational purposes only and does not constitute investment or tax advice. Past performance is not indicative of future results.

SOURCE RBC Wealth Management - U.S.